Correlation Between Alphabet and China Tower

Can any of the company-specific risk be diversified away by investing in both Alphabet and China Tower at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alphabet and China Tower into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alphabet Inc Class C and China Tower, you can compare the effects of market volatilities on Alphabet and China Tower and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alphabet with a short position of China Tower. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and China Tower.

Diversification Opportunities for Alphabet and China Tower

0.39

Correlation Coefficient

Alphabet  China Tower

Weak diversification

The 3 months correlation between Alphabet and China is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and China Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Tower and Alphabet is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alphabet Inc Class C are associated (or correlated) with China Tower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Tower has no effect on the direction of Alphabet i.e., Alphabet and China Tower go up and down completely randomly.

Pair Corralation between Alphabet and China Tower

Given the investment horizon of 90 days Alphabet is expected to generate 1.68 times less return on investment than China Tower. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.47 times less risky than China Tower. It trades about 0.21 of its potential returns per unit of risk. China Tower is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  12.00  in China Tower on October 5, 2024 and sell it today you would earn a total of  2.00  from holding China Tower or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alphabet Inc Class C  vs.  China Tower

Alphabet Class C

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

China Tower

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Tower are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Tower is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alphabet and China Tower

The main advantage of trading using opposite Alphabet and China Tower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, China Tower can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Tower will offset losses from the drop in China Tower's long position.

The idea behind Alphabet Inc Class C and China Tower pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.